FACTBOX: U.S. Weighs Sanctions Options for Iran

(Reuters) – The Obama administration has consulted outside experts as it weighs possible sanctions on Iran that could target its gasoline imports and insurers that underwrite the trade, among other options.

Here are some of the options the United States and its allies could consider if the negotiations fail to resolve the standoff over Iran’s nuclear program.

FUEL SANCTIONS

The U.S. Senate has passed legislation that would prohibit companies that sell refined oil products to Iran from receiving U.S. contracts to deliver crude to the strategic oil reserve.

And the chairman of the House of Representatives Foreign Affairs Committee, Howard Berman, says he will push ahead in October with a bill that would set sanctions on foreign companies that export refined petroleum products to Iran.

These moves are separate from efforts to dissuade foreign companies from investing in new technology for Iran’s oil and gas industry, the backbone of its oil-exporting economy, which has been hit by high inflation and unemployment.

U.S. sanctions currently ban any company investing more than $20 million in Iran’s oil and gas sector, although they have never been enforced.

The idea gaining the most traction in the halls of the U.S. Congress is targeting gasoline supplies. But Iran experts, oil traders and shippers warn that enforcing a complete cut-off would be next to impossible.

“Without the use of military force we can’t stop the flow of gasoline,” said Patrick Clawson, an Iran sanctions expert. But such sanctions could still lead to economic hardship and cause social unrest, posing a challenge for the Iranian government, he said.

Even if the Berman bill passes, it is not clear it would be enforced. The Obama administration has said it is committed to working with global partners, so it would be reluctant to take unilateral steps.

Russia and China, which both have close ties with Iran, have been cool to energy-sector sanctions. French Foreign Minister Bernard Kouchner voiced wariness of actions that would hurt ordinary Iranians. That could include gasoline sanctions.

While the main oil giants would likely halt supplies to Iran if the United States set new sanctions, China, Malaysia and Russia have stepped into a gap left by India’s Reliance and British company BP, which have stopped supplying fuel to Iran.

According to industry sources, oil companies that have supplied fuel to Iran in the last few months include: Royal Dutch Shell; Totsa, a unit of Total SA; Vitol, an independent company; Glencore International; Litasco, the trading arm of Russia’s LUKOIL; and state-run Chinese company Zhuhai Zhenrong Corp.

These companies could come under scrutiny in the event of new sanctions.

‘SMART’ SANCTIONS

These would be aimed at hurting members of the Iranian governing elite. Steps could include a ban on visas to restrict foreign travel for Iran’s Supreme Leader Ayatollah Ali Khamenei and President Mahmoud Ahmadinejad and their families.

There is debate in Washington though over the efficacy of such measures given the insularity of the Iranian leadership.

INSURERS AND SHIPPERS

Washington and its allies have discussed targeting shippers and companies that insure cargo to Iran, including shipments of refined oil.

Some analysts see this as a particularly promising area.

“It’s difficult to ship without insurance and reinsurance,” said Mark Dubowitz, executive director of the Foundation for Defense of Democracies policy institute.

Lloyds of London and Munich Re are among some companies that could be affected, U.S. analysts said.

But a marine insurance source, who declined to be identified, said a move to target insurers would be unlikely to have a big impact because many big Western financial companies are already restricted in their ability to write insurance for shipments to Iran.

Another shipping source noted Iran has a significant fleet of ships of its own “so there is a loophole there as far as the effectiveness of sanctions is concerned.”

BANKS

During the Bush administration, Washington began to crack down on financial companies that allow blacklisted entities such as Iranian companies and its larger state banks to illicitly access the U.S. banking system.

That effort has continued in the Obama administration, which kept on Stuart Levey, a U.S. Treasury undersecretary who is a point person for enforcement of such financial sanctions.

In January, Lloyds TSB Group Plc agreed to pay $350 million to U.S. authorities to settle charges that it faked records so sanctioned clients from Iran, Sudan and elsewhere could do business with the U.S. banking system.

In 2006, ABN AMRO Bank, N.V., now owned by Royal Bank of Scotland Group, agreed to pay $70 million in penalties assessed by U.S. regulators related to findings that the bank concealed the identities of sanctioned entities from Iran and Libya.

Some analysts see scope to further squeeze Iran’s ability to access the international financial system.